PUBLICATIONS

Tax Incentives for Developers and First-Time Home Owners Under the Tax Laws (Amendment) ACT, 2018

2023-04-25

Tax Incentives for Developers and First-Time Home Owners Under the Tax Laws (Amendment) ACT, 2018

Introduction

As you may be aware on 18th July, 2018, the President assented into law the Tax Laws (Amendment) Bill, 2018 (the “Act”) and whose effect is to amend provisions of several statutes within the existing tax-regime with the object of furthering the Government’s program of facilitating access to affordable housing.

The amendments will also act as an incentive to developers and first-time home owners under the affordable housing scheme and they include the following:

1. Stamp duty Exemption on First Time Home Owners

The Act amends the Stamp Duty Act to provide for exemption of stamp duty for purchase of house by a first-time home owner. However, this stamp duty exemption is limited to first- time purchasers under the Affordable Housing Scheme (“AHS”). Under the AHS, the National Government plans to facilitate private developers to build at least 500,000 affordable houses by the year 2022 in partnership with the County Governments.

2. Tax Incentives for Developers

The Act amends the First Schedule to the Income Tax Act to provide for tax exemptions with respect to capital gains and compensating tax accruing to licensed Special Economic Zone operators and developers.

Further the Act amends the First Schedule of the Value Added Tax Act, 2013 to provide for exemption of taxable supplies, imported or purchased for direct and exclusive use in the construction of a minimum of 5,000 housing units, by a licensed special economic zone operator, developer or enterprise upon recommendation by the Cabinet Secretary for the time being responsible for housing.

In addition, where a developer has constructed at least 100 residential units annually, corporate tax shall be computed at 15% for that year of income, subject to approval by the Cabinet Secretary responsible for housing.

3. Tax Reliefs for Buyers under the Affordable Housing Scheme

The Act further amends the Income Tax Act to provide for a 15% tax relief on of the gross taxable income. The tax relief is however limited to buyers under the AHS and the relief is limited to a maximum of KES 108,000.00 per annum.

4. Tax Reliefs Under House Ownerships Saving Plans

The Income Tax Act provides that the contributors to a Home Ownership Savings Plan are entitled to a monthly relief of KES 4,000.00 or KES 48,000.00 annually from their monthly income liable to tax. The Act amends this provision to provide that the allowable relief shall now be KES 8,000 or KES  96,000.00 annually.

Conclusion

From the foregoing, it is our view that the Act provides a tax incentive to developers and first-time homeowners under the AHS to enhance the Government’s agenda of facilitating access to affordable housing.

Jessica Mwenje & Kelvin Gathara